U.S. unemployment aid applications decline to 365,000

WASHINGTON — Fewer Americans applied for unemployment benefits last week, and a private survey showed businesses stepped up hiring in August. The data sketched a brighter outlook for the job market one day before the government reports on August employment.

Weekly applications for unemployment benefits fell by 12,000 to a seasonally adjusted 365,000, the Labor Department said Thursday. The four-week average, a less volatile measure, ticked up to 371,250.

Unemployment benefit applications are a measure of the pace of layoffs. When they consistently fall below 375,000, it suggests that hiring is strong enough to lower the unemployment rate.

Separately, payroll provider ADP said businesses added 201,000 jobs last month. That's the most reported by the survey since March. And ADP said July job growth was stronger than first thought: Employers created 173,000 jobs — 10,000 more jobs than the group reported last month.

"The labor market is getting better and while the pace of improvement is nothing great, the direction is clear," Joel Naroff, president of Naroff Economic Advisors, said in an email to clients.

Despite the positive signals, most economists tempered their expectations for August payroll growth.

The ADP survey only covers hiring in the private sector and excludes government job growth. The Labor Department's report on Friday will offer a more complete picture. The two surveys reported roughly the same private-sector job creation in July. But they have diverged sharply in previous months.

And the drop in applications likely won't affect the August jobs report, set to be released Friday. The data for that report were compiled three weeks ago. But it could signal better hiring in September.

Economists forecast that employers added 135,000 jobs last month, while the unemployment rate is expected to stay unchanged at 8.3 percent.

Weekly unemployment applications "are still stubbornly high, which is consistent with our expectations for a modest employment report in August," said Bricklin Dwyer, an economist at BNP Paribas

In July, employers added 163,000 jobs. It was the best month of hiring since February and an improvement from the average of only 73,000 per month created in the April-June quarter.

Still, the economy grew at a tepid 1.7 percent annual rate in the April-June quarter, down from the 2 percent rate in the January-March quarter and 4.1 percent in the final three months of last year.

Growth at or below 2 percent is typically too weak to lower the unemployment rate. Most economists expect the unemployment rate will remain above 8 percent through the November election.

President Barack Obama will address the Democrat National Convention in Charlotte on Thursday. Polls show most Americans regard Republican nominee Mitt Romney as better able to handle the U.S. economy.

Romney and his Republican allies have pointed to high unemployment as evidence that Obama's policies are not helping the economy. The unemployment rate was 7.8 percent when Obama took office and has been above 8 percent for the past 42 months. Most economists say "normal" unemployment is 6 percent or less.

But Obama and his allies have focused on more than 4 million jobs that the economy has added in the past 2½ years.

A weak employment report could push the Federal Reserve to announce some new action after its meeting next week to try to boost growth.